U.S. President Donald Trump recently stated that he is hoping to depreciate the dollar. This is a move that could significantly impact what might happen in the Forex market, and it could be a concern regardless of what Trump tries to do in order to reduce the value of the dollar.
Trump wants to depreciate the dollar because he feels that the dollar is too strong. He argues that the dollar’s strength is making it harder for American companies to compete with foreign ones. As a result, it is harder for American companies to export their products to other countries. Which in turn, makes it harder for many of those businesses to stay afloat.
Trump wants to improve how American manufacturing jobs are formed and how business can produce products, thus leading to his desire to weaken the dollar. This could make a real impact on the Forex market if this occurs, as the USD is one of the leading currencies.
How Depreciation Impacts Forex Markets
The potential for currency pairs that feature the American dollar to depreciate in value is significant. As the depreciation occurs, the American dollar will be weak when compared to other currencies. This could be a significant problem in some cases as depreciation can result in added inflation, thus making it so other currencies will not be as worthwhile.
An Interest Rate Increase Is Possible
There is a chance that an increase in the U.S. interest rate may come about soon. Which in turn, would make it harder for the American dollar to be worth as much as it could be. An interest rate increase could also establish a strong sense of economic instability and negatively influence how Forex pairs with the USD are valued.
Could Added Taxes Work?
Some added taxes may be imposed on foreign countries who bring their goods into the United States. Initial reports indicate that taxes like these could be focused on businesses that move their jobs out of the country and try to bring products back into the United States.
This might be a concern with regards to depreciation. If this happens, the American dollar will be easier for the Trump administration to manipulate. Added rates could help to impact how the American dollar is valued, thus potentially making it harder for currency pairs to gain in value.
Therefore, there is a chance that American dollar pairs could decline depending on how some changes occur. The changes to such pairs might especially come about amid signs of concerns relating to how the market has changed.
It is essential for Forex traders to watch all of the ways the Trump administration might try to depreciate the American dollar. Depreciation could have a massive impact on the USD currency if it happens.